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Investment profile

How SMSF investment performance is tracking.

Last updated 25 February 2021

Investment performance

SMSFs achieved positive returns for the past five years, with an estimated average 6.8% return on assets in 2018-19.

The estimated SMSF return on assets (ROA) continues to show a direct relationship to SMSF size. Generally, the larger the SMSF asset holding, the higher the ROA:

  • The proportion of SMSFs recording a zero or negative ROA improved from 28% in 2014–15, and 25% in 2017–18, to 24% in 2018–19. The proportion of funds with an ROA of greater than 5% increased from 36% in 2014–15, and 44% in 2017–18, to 47% in 2018–19.
  • In 2018–19 the average ROA for SMSFs was 6.8%, down from 7.4% in 2017–18, and up from 6% in 2014–15.
  • In 2018–19 the median ROA for SMSFs was 4.6%, up from 4.0% in 2017–18, and 3.2% in 2014–15.
  • There has been a trend of positive returns reported by SMSFS in each of the five years to 2018–19. Over that period most SMSFs recorded a positive ROA (76% in 2018–19).

Graph 5: Average and median returns for SMSFs, 2014–15 to 2018–19

Bar graph shows the average returns for SMSFs and APRA-regulated funds and the median returns for SMSFs from the 2015 financial year to the 2019 financial year from data table 23. In the 2015 financial year the average return for SMSFs was 6% and 8.9% for APRA-regulated funds and the median return for SMSFs was 3.2%. In the 2016 financial year the average return for SMSFs was 3.1% and 2.9% for APRA-regulated funds and the median return for SMSFs was 0.2%. In the 2017 financial year the average return for SMSFs was 10.2% and 9.1% for APRA-regulated funds and the median return for SMSFs was 5%. In the 2018 financial year the average return for SMSFs was 7.4% and 8.5% for APRA-regulated funds and the median return for SMSFs was 4%. In the 2019 financial year the average return for SMSFs was 6.8% and 7.1% for APRA-regulated funds and the median return for SMSFs was 4.6%.

See table 23 and table 24 of the data tables.

SMSF expenses

In 2018–19:

  • the average total expense ratio was 1.19% or $15,500, up 3% from $15,000 in 2017–18, and up 25% from $12,400 in 2014–15
  • median total expenses were $8,100, up 5% from $7,700 in 2017–18, and up 32% from $6,100 in 2014–15
  • SMSFs in retirement phase incurred lower average total expenses ($14,500) than funds solely in accumulation phase ($16,300)
  • average operating expenses were $6,500, up from $6,100 in 2017–18, and up from $5,500 in 2014–15. The average operating expense ratios were 0.49%, 0.5% and 0.51% respectively
  • median operating expenses were $4,100, up from $3,900 in 2017–18 and up from $3,600 in 2014–15.

While the average total expense ratio is highest for lower balance SMSFs, the total dollar value of average and median expenses increased as fund size increased. For example, in 2018–19:

  • in the $1 to $50,000 asset range the average total expense ratio was 17.0%, average expenses were $4,200 and median expenses were $2,000
  • in the greater than $2 million asset range the average total expense ratio was 0.7% but average expenses were $30,000 and median expenses were $16,200.

Graph 6: SMSF average and median expenses and total borrowings, 2014–15 to 2018–19

Bar graph showing average and median expenses and total borrowings from the 2015 financial year to the 2019 financial year from data tables 25 and 28. In the 2015 financial year the average expenses were $12,400 and the median expenses were $6,100 and total borrowings were $17,900 million. In the 2016 financial year the average expenses were $13,900 and the median expenses were $7,100 and total borrowings were $20,900 million. In the 2017 financial year the average expenses were $14,200 and the median expenses were $7,300 and total borrowings were $23,300 million. In the 2018 financial year the average expenses were $15,000, the median expenses were $7,700 and total borrowings were $24,500 million. In the 2019 financial year the average expenses were $15,500, the median expenses were $8,100 and total borrowings were $22,900 million.

Interest expense within Australia continues to rise as the level of SMSF investment in LRBAs grows. In 2018–19, 10.8% of SMSFs reported an LRBA, up from 10.7% in 2017–18, and up from 6.3% in 2014–15. Borrowings also grew as a result of the increased investment in LRBAs, from $17.5 billion in 2014–15 to $18.8 billion in 2018–19, leading to increasing average and median interest expenses. In 2018–19, almost 94% of borrowings were for LRBA purposes.

The following graphs show a breakdown of expenses reported by SMSFs by the asset range of the fund in 2018–19. The first graph shows that in general the average expense for each expense type rises as the size of the fund increases. A noticeable exception is overseas interest expenses due to the small population reporting expenses at this label. The second graph shows a similar trend for median expenses except for interest (both Australian and overseas), where SMSFs with balances up to $1 million have higher median interest expenses than larger funds.

Graph 7a: Average expense by expense type and asset range, 2018–19

Line graph showing the average expenses by asset range for the 2019 financial year from data table 25. For transparency, Other deductions have been excluded from Operating costs in the graph. Operating costs includes SMSF auditor fee, management and administrative expenses and the supervisory levy. In the $1-$50k asset range, interest expense within Australia was $9,829, interest expense overseas was $421, insurance premiums were $6,131, investment expenses were $2,751, forestry managed investment scheme expense was $608, other deductions were $1,246 and operating costs were $1,887. In the >$50k-$100k asset range, interest expense within Australia was $11,883, interest expense overseas was $6,483, insurance premiums were $4,518, investment expenses were $3,867, forestry managed investment scheme expense was $3,630, other deductions were $1,186 and operating costs were $2,215. In the >$100k-$200k asset range, interest expense within Australia was $12,857, interest expense overseas was $9,275, insurance premiums were $4,761, investment expenses were $5,698, forestry managed investment scheme expense was $3,461, other deductions were $1,479 and operating costs were $2,796. In the >$200k-$500k asset range, interest expense within Australia was $14,730, interest expense overseas was $13,701, insurance premiums were $5,622, investment expenses were $6,403, forestry managed investment scheme expense was $3,802, other deductions were $1,684 and operating costs were $3,535. In the >$500k-$1m asset range, interest expense within Australia was $16,706, interest expense overseas was $14,394, insurance premiums were $7,268, investment expenses were $6,996, forestry managed investment scheme expense was $4,361, other deductions were $2,075 and fixed administrative costs were $4,543. In the >$1m-$2m asset range, interest expense within Australia was $19,190, interest expense overseas was $9,420, insurance premiums were $9,375, investment expenses were $9,416, forestry managed investment scheme expense was $4,148, other deductions were $2,232 and operating costs were $5,767. In the >$2m asset range, interest expense within Australia was $33,665, interest expense overseas was $20,501, insurance premiums were $12,300, investment expenses were $21,272, forestry managed investment scheme expense was $14,954, other deductions were $6,896 and operating costs were $8,964.

Graph 7b: Median expense by expense type and asset range, 2018–19

Line graph showing the median expenses by asset range for the 2019 financial year from data table 25. For transparency, Other deductions have been excluded from operating costs in the graph. Operating costs includes SMSF auditor fees, management and administrative expenses and the supervisory levy. In the $1-$50k asset range, interest expense within Australia was $8,690, interest expense overseas was $120, insurance premiums were $3,501, investment expenses were $159, forestry managed investment scheme expense was $512, other deductions were $379 and operating costs were $1,513. In the >$50k-$100k asset range, interest expense within Australia was $12,224, interest expense overseas was $4,368, insurance premiums were $3,047, investment expenses were $761, forestry managed investment scheme expense was $1,566, other deductions were $429 and operating costs were $1,832. In the >$100k-$200k asset range, interest expense within Australia was $13,149, interest expense overseas was $8,064, insurance premiums were $3,485, investment expenses were $4,251, forestry managed investment scheme expense was $1,471, other deductions were $518 and operating costs were $2,420. In the >$200k-$500k asset range, interest expense within Australia was $13,880, interest expense overseas was $11,958, insurance premiums were $4,210, investment expenses were $4,731, forestry managed investment scheme expense was $2,532, other deductions were $518 and operating costs were $3,051. In the >$500k-$1m asset range, interest expense within Australia was $13,658, interest expense overseas was $12,239, insurance premiums were $5,288, investment expenses were $5,033, forestry managed investment scheme expense was $2,702, other deductions were $319 and operating costs were $3,051. In the >$1m-$2m asset range, interest expense within Australia was $12,466, interest expense overseas was $954, insurance premiums were $6,423, investment expenses were $6,489, forestry managed investment scheme expense was $2,492, other deductions were $259 and operating costs were $4,208. In the >$2m asset range, interest expense within Australia was $6,284, interest expense overseas was $141, insurance premiums were $7,840, investment expenses were $11,027, forestry managed investment scheme expense was $5,988, other deductions were $312 and operating costs were $5,635.

See table 25, table 26 and table 27 of the data tables.

SMSF asset allocation

At 30 June 2019:

  • SMSFs held 23% of their assets in indirect investments (trusts and managed investments)
  • SMSFs held 50% of their assets in either Australian listed shares or cash and term deposits
  • 76% of all SMSF assets are held in one of the following five investments: Australian listed shares; cash and term deposits; unlisted trusts; non-residential real property; and LRBA assets.

As an SMSF’s total assets increased, the proportion of assets held in cash and term deposits and 'other assets' tended to fall significantly while the proportion of assets held in trusts, LRBAs and non-residential property tended to increase.

Graph 8: SMSF asset allocation, 30 June 2019

Doughnut graph showing the SMSF asset allocation at 30 June 2019 from data table 28. At 30 June 2019 28.7% of SMSF assets were listed shares, 21.1% were cash and term deposits, 5.3% were other managed investments, 11.4% were unlisted trusts, 5.8% were listed trusts, 4.8% were residential real property, 9% were non-residential real property, 6.1% were limited recourse borrowing arrangements, and 7.8% were all other assets.

SMSFs in retirement phase had very similar asset allocations to SMSFs in accumulation phase. The only noticeable differences were that SMSFs in retirement phase tended to favour listed shares, while accumulation phase funds held a greater proportion in LRBAs.

Funds in retirement phase held 65% of total SMSF assets. This reflects a small increase, up two percentage points from 2017–18 but down five percentage points over the five years from 2014–15.

See table 28, table 29 and table 30 of the data tables.

Diversification

Generally, smaller SMSFs have less investment diversification than larger SMSFs. At 30 June 2019:

  • cash and term deposits were the sole asset held by 7% of SMSFs.
  • 9% of SMSFs held all their investments in one asset class, consistent with 2017–18 and down from 12% in 2014–15
  • 40% of SMSFs with assets of less than $50,000 held all their assets in one asset class, compared to less than 16% of SMSFs with assets over $500,000
  • 44% of SMSFs held 50% or more of their assets in either cash and term deposits or listed shares

See table 31, table 32, table 33 and table 34 of the data tables.

Property investment

The growth in the value of property held by SMSFs is attributed to both new investment and the rising value of Australian real property. SMSFs invest in real property both directly and through LRBAs:

  • Total SMSF investment in real property has grown to $147.2 billion in 2018–19, up from $147 billion in 2017–18 and $119.4 billion in 2014–15.
  • Direct investment in non-residential real property grew by 7% from $63.1 billion in 2014–15 to $67.3 billion in 2018–19. Investment in 2017–18 was $66.6 billion.
  • Residential property investment has risen over the past five years, increasing by 55% from $23.1 billion in 2014–15 to $35.8 billion in 2018–19. Investment in 2017–18 was $36.2 billion.
  • Overall SMSF investment in residential real property, both directly and through LRBAs, was $59.6 billion in 2018–19, representing 0.9% of the total Australian residential property market of $6,610.6 billionFootnote9..
  • In 2018–19, residential property investment was highest in the $200,000 to $2 million range, where 6% of SMSF assets are invested in this asset type.
  • In contrast, investment in non-residential real property increased as fund size grew, peaking at 16% of assets in the over $50 million range.

Graph 9: SMSF investment in real property, 2014–15 to 2018–19

Bar graph showing SMSF investment in real property from the 2015 financial year to the 2019 financial year from data table 28. In the 2015 financial year $63.1 billion was invested in non-residential real property, $9.4 billion was invested in non-residential real property under a LRBA, $23.1 billion was invested in residential real property, and $9.8 billion was invested in residential real property under a LRBA. In the 2016 financial year $65.8 billion was invested in non-residential real property, $11.9 billion was invested in non-residential real property under a LRBA, $28.5 billion was invested in residential real property, and $12.9 billion was invested in residential real property under a LRBA. In the 2017 financial year $66.2 billion was invested in non-residential real property, $18.6 billion was invested in non-residential real property under a LRBA, $34.4 billion was invested in residential real property, and $20.7 billion was invested in residential real property under a LRBA. In the 2018 financial year $66.6 billion was invested in non-residential real property, $20.5 billion was invested in non-residential real property under a LRBA, $36.2 billion was invested in residential real property, and $23.6 billion was invested in residential real property under a LRBA. In the 2019 financial year $67.3 billion was invested in non-residential real property, $20.3 billion was invested in non-residential real property under a LRBA, $35.8 billion was invested in residential real property, and $23.8 billion was invested in residential real property under a LRBA.

See table 28 of the data tables.

SMSF borrowings

At 30 June 2019:

  • 12% of SMSFs held total borrowings of $22.9 billion and equating to 3% of total SMSF assets
  • the average value of total borrowings was $348,000, down from $362,000 in 2017–18, and $381,000 in 2014–15
  • the median value of total borrowings was $261,000, down from $268,000 in both 2017–18 and 2014–15
  • 94% of the total value of borrowings reported by SMSFs was for LRBA assets. The average value of borrowings for LRBA purposes was $354,000, down from $370,000 in 2017–18.

Over the five years to 2018–19, on average 90% of SMSFs with borrowings were in accumulation phase, while 10% were in retirement phase.

See table 28 of the data tables.

Limited recourse borrowing arrangement (LRBA) assets

In 2018–19:

  • the number of SMSFs reporting LRBAs was 10.8%, up from 10.7% in 2017–18 and 6.3% in 2014–15
  • SMSFs reported borrowings for LRBA purposes of $17.7 billion
  • LRBAs made up 6.1% of all SMSF assets, down from 6.5% in 2017–18 and up from 3.7% in 2014–15
  • assets owned through LRBAs had grown to $46.0 billion, consistent with 2017–18 and up from $21.1 billion in 2014–15
  • of the $46.0 billion of assets held under LRBAs, 96% ($41.1 billion) is related to real property. This was split between residential ($23.8 billion or 52%) and non-residential real property ($20.3 billion or 44%).

Graph 10: Total LRBA assets and proportion of SMSFs reporting LRBAs, 2014–15 to 2018–19

Bar graph showing total LRBA assets and the proportion of SMSFs reporting LRBAs from the 2015 financial year to the 2019 financial year from data table 28. In the 2015 financial year total LRBA assets were $21.1 billion and 6.3% of SMSFs reported an LRBA. In the 2016 financial year total LRBA assets were $26.6 billion and 7.3% of SMSFs reported an LRBA. In the 2017 financial year total LRBA assets were $41.1 billion and 9.6% of SMSFs reported an LRBA. In the 2018 financial year total LRBA assets were $46.1 billion and 10.7% of SMSFs reported an LRBA. In the 2019 financial year total LRBA assets were $46 billion and 10.8% of SMSFs reported an LRBA.

See table 28 and table 29 of the data tables.

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